House to consider rate reform for small employers

When it returns to Harrisburg in June, the PA House of Representatives plans to give top priorioty to a bill that would bring greater stability and predictability to the chaotic small group health insurance market.

Currently that market, which consists primarily of small business owners purchasing health insurance plans for their employees, suffers from annual rate spikes that often exceed 50 percent. Many employers are forced annually into a time-consuming and frustrating search for affordable coverage. What's worse, under the stress of the economic recession, some employers have decided to stop offering a health plan for their employees, thus causing more Pennsylvanians to become uninsured.

The problem is that Pennsylvania is one of only two states in the U.S. that does not have rate protections for small employers written into law. Insurers are free to evaluate each small employee group by itself and to set rates as high as they choose. When an employee group begins looking like a poor financial risk for the insurer, it can simply jack up the rate, effectively shedding the risk.

House Bill 746, authored by Rep. Tony DeLuca of Allegheny County, would change this by requiring insurers to establish a base rate by reference to all small employee groups in the same geographic region of the state. From this base rate, the insurer could increase or decrease the actual rate by no more than 33 percent based on only two factors: age and wellness incentives. The medical history or claims of the individuals in a group, or their split between male and female, could not be considered.

The bill does not promise to reduce health insurance costs across the board. That could only happen if changes are made in the cost of medical care itself.

But by spreading costs across all groups in a region, the impact of illness or accident in one small employee group will be shared by many. This will eliminate the annual rate spikes that have caused such distress in the small employer market.

The House Insurance Committee is expected to take up the bill on June 1. Amendments to be offered at that time will limit the rate restrictions to only the largest insurance carriers, thus leaving the smaller companies free to compete for additional market share. If approved by the Insurance Committee, the bill will be debated by the full House during the first or second week of June.

For more information on HB 746, go to the pull-down menu under "Health Care in PA" at the top of the page.